China Is Plenty Creative, Just Not in Right Ways

Operating in a country where something as modest as opening a cigar shop can be fraught with difficulty, Chinese entrepreneurs are renowned for being able to find creative solutions to a wide range of everyday problems. But that resourcefulness won’t serve China’s economy in the long run, according to one veteran China watcher.

What China lacks, argues economist Arthur Kroeber, founder of the research firm Dragonomics, is innovation that can translate to business with the outside world.

Reuters

“What’s sad is the amount of creativity you see in China is phenomenal,” Mr. Kroeber says. “But it’s not always directed in ways that are ultimately productive.” It’s one thing to figure out how to fix a car that needs parts no longer available on the market. It’s another to create “innovative solutions which are scalable throughout the entire world.”

China in the middle of trying to shift its economy away from an era of super-charged growth fed by exports and massive government spending to an age of slower but more sustainable growth based on innovation and domestic consumption. Some analysts, like Peking University finance professor Michael Pettis, are skeptical that China can pull off that transition without going through a lot of pain.

Speaking at a panel discussion for the Beijing Bookworm’s Literary Festival on Sunday, Mr. Kroeber laid out a relatively optimistic case for China’s future growth as long as the country can find a way to reform the financial sector and tax system, trim the unfair advantages enjoyed by state-owned enterprises and address an aging population.

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